Both the APT and the CAPM Imply a Positive Relationship

question 32

Multiple Choice

Both the APT and the CAPM imply a positive relationship between expected return and risk. The APT views risk:

• A) very similarly to the CAPM via the beta of the security.
• B) in terms of individual inter-security correlation versus the beta of the CAPM.
• C) via the industry wide or market-wide factors creating correlation between securities versus the CAPM beta.
• D) the standardized deviation of the covariance.

---

Definitions:

Farads

The unit of capacitance in the International System of Units (SI), measuring a device's capability to store electrical charge.

Voltage Drop

A decrease in electrical potential along the path of a current flowing through an electric circuit, resulting from the resistance or impedance of the circuit components.

Ohm Resistor

An electronic component with a specified resistance in ohms, used to regulate the flow of electrical current in a circuit.

Post-trip Inspection

A post-trip inspection is a thorough check performed on a vehicle following a trip to identify and fix any issues or potential hazards.